Ripple’s Planned Stablecoin Draws SEC Scrutiny for Unregistered Status

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As an analyst with a background in securities law and experience following the cryptocurrency industry, I find the SEC’s argument against Ripple’s planned stablecoin and its continued scrutiny of XRP offerings concerning. The SEC’s stance that Ripple’s proposed stablecoin is evidence of the company’s disregard for securities laws and its comparison of Ripple’s argument to a restaurant needing only a fishing license because it has one in California, seems dismissive and oversimplified.

According to a recent court filing, the Securities and Exchange Commission (SEC) in the United States has targeted Ripple‘s planned stablecoin project. The SEC alleges that this proposed cryptocurrency is indicative of Ripple’s persistent disregard for legal regulations.

SEC Argues against Ripple Using Stablecoin

On May 7, the Securities and Exchange Commission (SEC) referred to the upcoming stablecoin as an “unregistered cryptographic asset” in a statement. The SEC further indicated that only a permanent injunction could prevent Ripple from continuing unregulated sales and activities related to XRP. According to the SEC, Rippe has been engaging in unregistered institutional sales of XRP and intends to do so if no injunction is issued by the court.

The SEC rejected Ripple’s pledge to adhere to US securities regulations despite having licenses from various other countries. This assertion, as stated in the brief, is reminiscent of arguing that a New York restaurant doesn’t need a liquor license because it possesses a fishing permit from California – an argument that is clearly illogical.

As a crypto investor, I can understand the SEC’s perspective in this case. They argue that since Ripple made significant profits from selling XRP, a hefty penalty is warranted. While I acknowledge that the proposed penalty may seem large to some, it aligns with previous cases where similar penalties were imposed based on the gains derived from such activities.

If Ripple, which gained almost $1 billion by allegedly breaking Section 5, boasts a multi-billion-dollar enterprise from selling XRP, including its substantial XRP reserves and cash in hand, the proposed penalty seems insignificant. This lenient punishment can be seen as a mere warning instead of a deterrent or retribution. Conversely, it may even incentivize other crypto asset issuers to flout Section 5, depriving investors of the mandatory disclosures set by Congress and making such infractions a profitable venture.

Ripple has countered the SEC’s argument in their brief, characterizing it as the SEC’s misapplication of the law. In a recent post on X, Ripple’s Chief Legal Officer Stuart Alderoty alleged that the SEC was attempting to deceive the judge. Notably, Alderoty expressed optimism that Ripple is nearing a resolution in the ongoing lawsuit.

The New Stablecoin

Last month, Ripple revealed its intention to introduce a stablecoin pegged to the US dollar as part of its strategy to deepen the connection between cryptocurrency and conventional finance sectors. As per an official Ripple statement, the forthcoming stablecoin will be secured by deposits in dollars, short-term U.S. government securities, and other liquid assets.

The article brings forth some advantages of the stablecoin offered by Ripple, among which is their “regulatory-compliant approach.” Ripple and its affiliated entities possess various licenses, including a New York BitLicense and approximately forty money transmitter permits within the United States. Furthermore, they have been granted permissions from the Monetary Authority of Singapore and the Central Bank of Ireland. At the Paris Blockchain Week, Ripple CEO Brad Garlinghouse announced that the stablecoin would bolster liquidity on the XRP Ledger (XRPL).

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2024-05-08 17:55